“The hurrier I go, the behinder I get!”
Alice In Wonderland, Lewis Carroll
HMRC is currently piloting Making Tax Digital (MTD) for VAT but this is by invitation only. Once HMRC is satisfied that things are working as expected, it proposes to allow business to join the pilot without invitation. It will be interesting to see when this happens, which will be the true litmus test.
There are now less than six months before MTD proper is supposed to go “live” on the 1st April 2019. When will piloting be opened up to everyone?
If your business turns over more than £85,000 and is required to register for VAT, you’re going to be in the MTD club. Once you’re in this position, you can’t leave if your turnover drops below £85,000.
All this means that right now, if you think you will soon be a member of the MTD club, you should be looking round for a suitable provider of software to get you over the MTD line.
So, how do you find a supplier?
We’re not talking about the person, firm or company preparing or reviewing your VAT return. The MTD provider’s software will submit your VAT return. Initially it’ll be every quarter or year, as it is now. But, the preparation and reviewing of your VAT business is no longer going to be separate. It will be an inseparable part of the whole VAT submission process. The MTD software must be used to record and reflect your transaction from the outset.
We don’t think many people have cottoned on to this yet. This is why MTD is such a monumental big deal. We think Lewis Carroll got it right, it’s important to not rush.
The HMRC Notice 700/22 Making Tax Digital highlights some important issues. Data transfer between VAT software or applications must use “digital links”. In other words, electronically. This, thankfully, does provide for spreadsheets. But it does not allow you to print a spreadsheet, then re-input the details manually to MTD.
There will be a “soft landing” period for digital links. This means you can “copy and paste” (the best way of describing it) up until 31 March 2020.
Is this because the technology for digital links is not proven as yet?
You must use software that records and preserves digital records and provides HMRC with the data via HMRC’s Application Programme Interface (“API”). API is something you will hear a lot more of, if you are joining the MTD club.
HMRC has published a list of software suppliers offering product that is now developed, at: https://www.gov.uk/guidance/software-for-sending-income-tax-updates#VAT. This list will show you whether they service Business or Tax Agents too, and what the software does.
The ideal situation is to find a supplier that supports Agents as well as the business itself. That’s just our opinion, but we think this is advisable for small and many medium business enterprises. These businesses are not staffed by hundreds and very often the owner is also the manager of everything that happens. Or indeed doesn’t happen.
With agent access, your agent can log in to your records, review your VAT entries, or help in making them. Next? Choose the range of functions that you want. The full range of functions are:
- Digital record keeping
- Submit the VAT Return
- View the VAT Return
- View the VAT liabilities
- View VAT payments
Not all of the existing suppliers are offering all of these functions. You don’t have to have all of the functions, but if you use spreadsheets you’ll need Digital Records to go with the Submit Vat Return.
Changes You Will Miss (If You’re Not Careful)
Remember, the HMRC VAT screens will disappear from our view for returns that commence from 1 April 2019. If you are a user of the Flat Rate or Capital Goods Schemes, or Partially Exempt calculations, manual adjustments also will be required.
Maven Accountants Ltd are Certified Advisors for Xero and Quickbooks. But this isn’t a sales pitch. We can work with any HMRC approved software provider of MTD for VAT.
Has your accountant or tax agent spoken to you yet about MTD for VAT? If not, then you’re welcome to talk to us.